Despite Government's Best Effort Solar Industry On Hold Till 2010

Despite valiant government effort, the solar industry won't be thawed until 2010, mostly because banks are still stingy in their lending practices, says FBR in a note this morning. While that's discouraging today, in the next year or so, FBR sees a sustainable growth for solar companies.

This month the Treasury Department will provide details on how companies can apply for a grant on new projects. Through the stimulus package, large utility or commercial scale projects will be eligible for a cash grant worth 30% of the cost of the solar project.

The detail that is of interest for solar companies is when the money will be paid out. Solar companies could receive the grant once the project is under construction, once they have a percentage of the project financed or after they apply.

Two other government actions of note: Another $800 million in loan guarantees from the stimulus could be doled out this month. And the Interior Department is setting aside federal land for solar projects, hoping to speed up the process of building new solar plants.

While these programs will help get some solar projects going, it won't be enough. Building solar farms is an expensive process that requires taking on debt. Right now, the debt market is shot. Until that changes, or utilities start using money on their balance sheets to pay for the projects, these government projects will only help so much. FBR sees the debt market opening next year, and along with it an expansion of solar projects.